The IRS is reviewing the operations of its Whistleblower Office to improve the timeliness and quality of its decisions on whistleblower claims, Deputy Commissioner for Services and Enforcement Steven T. Miller said in an internal IRS memo dated June 20. The review will yield a set of “expectations” for timely
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IRS practice & procedure
Ban on political activities: An election-year warning for charities
As the 2012 elections draw near, the IRS is once again increasing its oversight of the ban on political campaign activities by Sec. 501(c)(3) charitable organizations. An IRS work plan (Exempt Organizations 2011 Annual Report & 2012 Work Plan, available at tinyurl.com/bos7pb4) states that, in enforcing the ban this year,
IRS compliance and enforcement trends
The IRS and state and local taxing authorities are developing compliance goals and strategies that are affecting CPAs and will continue to do so in new ways in the coming decade. Jim Buttonow and Brian Howell described them in a presentation at the AICPA Practitioners Symposium and TECH+ Conference in
No exclusion for former spouse from assignment of disability income
The Tax Court recently clarified that disability retirement benefits assigned to a former spouse under a divorce agreement are ineligible for exclusion from income, even though the benefits would qualify for exclusion as compensation for personal injury had the other ex-spouse received them. The former spouse’s argument that she was
Federal law preempts Alabama statute denying tax deduction for illegal alien employees
The Eleventh Circuit Court of Appeals held that the section of Alabama House Bill 56 that disallowed an employer a state tax deduction for wages and compensation paid to an alien unauthorized to work in the United States was preempted by federal immigration law (United States v. Alabama, No. 11-14532
IRS Chief Counsel’s office issues advice on identity theft returns
In Program Manager Technical Advice 2012-13, the IRS Office of Chief Counsel explained in a memorandum to Small Business/Self-Employed Division attorneys what the IRS can do when a return is filed by an identity thief in order to generate a fraudulent refund and the IRS has issued a statutory notice
IRS announces the end of tiered issues
Effective Aug. 17, 2012, the IRS will no longer use the tiered management process to set examination priorities and address important issues in the Large Business & International division (LB&I). Instead, it will examine the former Tier I, II, and III issues and assess risk in the same manner as
Corporation cannot deduct California business privilege tax in year paid
Wells Fargo, an accrual-basis taxpayer, could not deduct the California business privilege tax it paid in one year (year 1) for the privilege of doing business the next year (year 2), even though California law had, since 1972, treated the tax as being incurred in year 1, a federal district
Removal of two-year limit on innocent spouse claims does not revive taxpayer’s case
The U.S. District Court for the District of Massachusetts dismissed a taxpayer’s claim that she was entitled to innocent spouse relief under Notice 2011-70, which announced the removal of the two-year limitation period for claims for equitable innocent spouse relief under Sec. 6015(f) (Haag, No. 11-CV-11591-PBS (D. Mass. 8/13/12)). The
Fraud convicts cannot argue in Tax Court that payments did not result from fraud
Taxpayers who had been convicted of fraud were precluded from later arguing that payments they received were not the result of fraud, the Tax Court held in two related cases (Atkinson, T.C. Memo. 2012-226, and Boultbee, T.C. Memo. 2012-227). The court invoked the doctrine of collateral estoppel to prevent the
Installment interest from settlement with state is tax-exempt
The Third Circuit Court of Appeals, reversing the Tax Court, held that a state that paid taxpayers installment interest on amounts owed pursuant to an eminent domain settlement did so under its borrowing authority, and the interest therefore was tax-exempt. According to the court, the interest was paid due to
Taxpayers residing outside U.S. questioned at U.S. border regarding back taxes
Taxpayers traveling to the United States with unpaid U.S. tax assessments can be detained at the border, questioned, and flagged for follow-up enforcement. If a taxpayer has an unpaid tax liability and is subject to a resulting Notice of Federal Tax Lien, the IRS may submit identifying taxpayer information to
Accounting firm’s payments to owners flunk independent-investor test
The Seventh Circuit held that an accounting and consulting firm organized as a C corporation could not deduct payments to related entities because they were dividends, not compensation for services rendered by the company’s owners. The firm was founded in 1979 by three accountants. During the tax years at issue—2001,
Charitable deduction erased by statement’s omission
The Tax Court upheld a disallowance of more than $22,000 of a couple’s charitable contribution deduction solely for the lack of a contemporaneous statement from their church, the donee, that the couple received no goods or services in return. The taxpayers, David and Veronda Durden, made the contributions by check,
Tax compliance for acquisitions: Prepare before purchasing
Fears of a “double-dip” recession in 2012 may have subsided, but the overall economic forecast remains uncertain. Therefore, companies are looking beyond organic, internal growth to external growth sources to bolster company performance. A recent study by The Boston Consulting Group (BCG) touted the power of acquisitions for growth during
Regulations finalize rules on entertainment use of business aircraft
On Tuesday, the IRS issued final regulations relating to the disallowance under Sec. 274 of deductions for the use of business aircraft for entertainment (T.D. 9597). The final regulations adopt, with some modifications, proposed regulations issued in 2007 (REG-147171-05), which in turn followed principles first expressed in Notice 2005-45. In
Treasury releases model intergovernmental agreement for FATCA
The Treasury Department on Thursday released a model intergovernmental agreement designed to implement the information-reporting and withholding-tax provisions in the Foreign Account Tax Compliance Act (FATCA), which was enacted by Congress in 2010 to require foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by
Taxpayers who did not establish insolvency must recognize COD income
Taxpayers who settled a credit card debt for $4,412 less than they owed in 2008 had to include that amount in income because they did not prove they were insolvent under Sec. 108(a)(1)(B) at the time of the debt discharge (Shepherd, T.C. Memo. 2012-212). Sec. 108(a)(1)(B) excludes cancellation of debt
Tax Court upholds regulation requiring dependents be citizens in year tax benefits are claimed
On Thursday, the Tax Court upheld Regs. Sec. 1.152(a)(1), which requires that children be U.S. citizens at some time during the calendar year for which the children are claimed as dependents, as a valid interpretation of Sec. 152(b)(3)(A) (Carlebach, 139 T.C. No. 1 (2012)). The taxpayers and their six children
American Institute of CPAs recommends changes to tangible property guidance
On July 16, 2012, the AICPA submitted a comment letter to the IRS recommending various changes and simplifications to the voluminous and complex regulations regarding the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets (T.D. 9564 and REG-168745-03) and the revenue procedures governing the accounting method
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